Here are some incisive questions asked by a Twitter participant named Anne D on my idea that a better approach to health care reform might be to allow for large, competing, non-employer based competing self-funded ERISA Plans.

The answers are what they are but these are particularly excellent questions and I thank Anne D for allowing me to share them.

QUESTION: Isn't individual market essentially such that your "group" is the state you live in, minus people with employer insurance, thus, "Here are your plan options?"

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At best. That is what is called "Community Rating." That is how rates in the Exchanges are set.

The alternative is "Experience Rating," where the insured's rates are calculated based on claims data for similarly situated individuals.

Generally, Community Rating benefits older or less health people and Experience Rating benefits younger or healthier individuals.

Groups plans tend to be more balanced groups demographically and, in addition, they have group buying power. Additionally, inevitably, the younger healthier individuals grow older and less healthy and groups give you a way to account for that in a more obviously equitable way. (It is less the current, "I'm getting screwed on rates in ObamaCare!" and more "I know I will pay slightly more when I am young in order to pay slightly less when I am older.")

QUESTION: Do we try to insure everyone first, or make sure everyone with insurance has optimal insurance first? ACA tries to do the first, but the individual. market is often unaffordable, while employer plans are often crud. But without the ACA, some people can't even get crud.

Because of this, I'm not sure the health insurance market isn't optimally a group (rather than individual) market.

Even in a Community Rated System, the individual has limited market power and that market power is atomized, even in the Exchanges under PPACA or under the Federal Employee Health Benefit Program ("FEHBP").

Modern Managed Care Insurance models are both an insurance model and a group discount model. "Discounted Fee for Service" means doctors and institutional providers provide Plans a volume discount. With commercial plans, participants and beneficiaries may see less of that savings than in what I am proposing, essentially not-for profit Plans bargaining with payers for actuarial services and administration and with doctors and institutional providers over fee schedules.

Perhaps the first step is to modify the Employee Retirement Income Security Act ("ERISA") and its implementing regulations (which, despite the name, covers health plans as well) to make it easier to form non-employer-based groups.

QUESTION: Some of the problem is states refusing Medicaid expansion, but even without that, how to insure people who aren't part of any organization?

I'm not sure Medicaid is such a good program. The reimbursement rates are low and many doctors do not participate (the buzz word is "par'), pushing a lot of Medicaid patients into treatment at EDs, which tends to be both expensive and scatter-shot.

I think "privatizing" Medicaid into these non-employer based Plans might be a useful approach. The Plans would be paid a Per Member/Per Month ("PM/PM") fee to provide care for a number of Medicaid patients assigned. The Plans would also have other participants and beneficiaries and could have some ability to incentivize more physicians to treat Medicaid patients and to incentivize Medicaid patients to be more compliant patients.

This could put both more accountability and a human face on a system that is often abused by everyone.

QUESTION: BUT WHAT IS THE VALUE OF DECIDING WHAT TESTS SHOULD BE COVERED?

There are a couple of levels to this answer: clinical; economic and managerial.

Further, the medical guidance as to what screening tests are required changes all the time. Recently, the guidance on mammograms changed considerably. Mandating these things as a matter of law, makes it far more difficult to stay current with the state of the art in medicine.

Economically, the key to building groups that are economically sustainable is to have enough young healthy participants and beneficiaries. Making that group pay a higher fee to defray the costs of older people’s screening tests hardly seems an effective way to do so.

Managerially, the better approach to this might be to not provide first dollar coverage of screening tests, but to reduce the premiums of those (generally older members) of these Plans who comply with the recommended schedules of screenings.

QUESTION: COULD STATES BE A BASIS FOR SUCH PLANS?

Attempts to do this have not been unknown.

Several states, including the State of Hawaii, have tried to pass single payer laws since the 1970s. Vermont attempted to actually implement such a plan in 2011, abandoning the effort by 2014.

As a first impression, it would appear that this might possibly work better with smaller states or larger cities, where you might get large (but wieldy) groups comprised of a balanced group by age and health status. It has not proven sustainable for small states to date and city-sponsored HMOs have tended to become not-for-profits.

It also seems that running an ERISA Plan is a bit outside the “core business” of government.

QUESTION: ISN”T THE WHOLE COUNTRY THE LARGEST POSSIBLE GROUP? WHY NOT BRITISH OR CANADIAN STYLE SINGLE PAYER?

Again, providing (as with British National Health Service {“NHS”}) or financing healthcare (as with Canadian, Australian or New Zealand Medicare) is not really a core business of government.

Beyond that, competition usually leads to lower prices and higher quality and fuels innovation. A good example would be the issues with cost and quality with the US Automobile industry prior to the rise of the German and Japanese auto industries that forced Detroit to lower prices and improve quality.

Having large, well-designed, competing ERISA Plans seems to provide a fairly good way to increase quality and decrease costs.

Company sponsored self-insured ERISA Plans (like those of Kroger’s and Whole Foods) are widely admired for their low costs and high quality. Guild (unions that consist of independent contractors) Plans, such as the Screen Actors’ Guild or Writers’ Guild of America, are likewise well regarded for their low costs and high quality.

Making these proposed Plans non-employer-based also may make it possible to develop a workable “Bismarck System,” a system of government mandated, work-related, private insurance, used in places like France, the FRG and Japan.

Despite the fact that a system of employer-provided private insurance became common in the US during and after WWII, it never became universal and now covers a declining plurality of Americans. Part of the reason for this is that self-employment and starting a small business is (and has been) common in the US. The “Gig Economy” has exacerbated these trends.

Comments

The issue is that Americans want high quality, ease of service health care for a bargain basement price. Countries that have health care provided to all its citizens have the usual long waits, rationalized care, reduced care, etc. But then they are not bitching about the $1K premium they pay each month.

We as a country will need to determine what we want. If we want top notch get to spend quality time with the doc we are going to need to pay out our ass for coverage. Or we can go with a cheaper public option in which the doc skates between patients giving 2 minutes to each patient. And where only the worst cases get to spend a night in a hospital room.

The interesting thing is that the system in France, the FRG and Japan is cheaper and generally of better or similar quality to what we have here.

The problem is that many Americans are either self-employed or part of small businesses. A Bismarck System (as in France, the FRG and Japan) is usually built around pervasive employment by large companies or a pervasively unionized work force, neither of which exist here.

The question becomes, how could you do it within our system and that answer appears to be expanding MEWAs under ERISA.

John, Why do the private insurance companies continue to hold so much sway on government policy? I have been self employed since the early 80's and it is a huge disadvantage in obtaining affordable ,decent coverage. From being forced into the individual market to the tax disadvantages . Groups and large corporations have major advantages from treating insurance as a cost of doing business while the self employed are only entitled to much smaller deductions. What can be done to level the playing field?

If Medicare administration cost's are only 1/3 of private insurer's why wouldn't this be a big driver in lowering cost's with medicare for those who choose it? How much more expensive would a medicare option be than the current ACA options. At 80/20 it probably would cover more than most current plans?

I'm not sure Medicaid is such a good program. The reimbursement rates are low and many doctors do not participate (the buzz word is "par')

That is why Medicaid is a good program. When people get something for free, as is the case with Medicaid, it shouldn’t be good. In a capitalist society the incentive to work should be such that you get better stuff than by not working. Or look at it this way, if Medicaid was really good insurance everyone would be looking to get it and it would bankrupt the country if they did so.

As with any larger system there are many counter currents that make the problem complicated. As long as the insured never see the costs, at the time of purchase, it is likely that costs will spiral out of control, absent an overseer that arbitrarily controls costs, by reducing access or just setting limits on what the provider can charge.

There are only two possible controls on the cost of something. 1) The purchaser sees the price tag, at the time of purchase, and then makes a decision about whether to buy it or not. 2) Some regulating authority controls the costs.

The problem with health care is that we dont want to make cost analysis at the time we are sick, as we do when fixing our house or our car. We dont go out and get bids for fixing the problem, and then decide who to choose based on a trade off of quality vs price. This removes the normal price control from the system. We want to do anything the doctor suggests regardless of the cost, and regardless of relative effectiveness. We also dont want to pay very much for this privilege.

Government, and employers have made this problem worse by limiting our choices on buying insurance. It is difficult to shop around for insurance, much less the health care itself.

"Government, and employers have made this problem worse by limiting our choices on buying insurance. It is difficult to shop around for insurance, much less the health care itself."

Which drives part of my idea. One nice thing about ERIDA Plans is that they have to publish a "Summary Plan Description," saying what they cover and how,

If people could shop for various types of Plans, many I would guess, with HSAs for routine Primary Care kinds of things ("Rule out broken ankle" or "Rule out streph."); discounted fee-for service HMO relationships with a panel of docs and institutional providers for common serious things (cardiac issues and common cancers, for example); and high deductible insurance (at a group rate) for the "Black Swan" events, I think it would work better. (Which might also be a way to keep life-time limits from being an issue without PPACA's recourse to ipso dixit.)

Additionally, neither government nor employers have "providing insurance" as a core business. Insurance companies do, but HMO products have moved it out of the pure insurance realm to a degree and I'm not sure they aren't out of their depth also.

Medicaid shouldn't be free, it has to charge something, but it ought not be rolled back either. Insurance coverage should stay as is, the focus needs to be on reducing expenses, like import foreign prescription drugs; cap medical malpractice compensation; streamline insurance bureaucracy and paperwork; allow nurses, pharmacies and others to offer primary care; and enable insurers to compete nationally.

Of course Medicaid has a positive effect on public health. Any money the government diverts towards healthcare will have a positive effect on public health. The problem is that we live in a world of limited financial resources. We simply can’t afford give too many people Medicaid or have it be really good healthcare insurance. As to what to do about someone with severe healthcare needs like TB, that guy should purchase healthcare insurance. To the extent he can’t afford it, he’s an obvious candidate for Medicaid quality insurance, which should only cover the necessities like contagious TB.

The way out this mess is to implement tax deductible Health Savings Accounts and offer a large choice of insurers with plans that offer a wide range of coverage at competitive prices. When you're young, put more money into your Health Savings Account and just purchase true catastrophe insurance because the odds are in your favor when you're young. You do just the opposite when you get older, only now you have a lifetime of savings to pay for day to day health care costs.

Get the government OUT of traditional health care and let people use the free market to purchase what they want at the price they're willing to pay. If you're a cheapskate and purchase lowball coverage, then don't bitch when you get seriously ill and they take your house away to pay your medical bills.

Anything involving the government has the same chance as expecting the Tooth Fairy to pay for health care!!!

Before anyone comes back with "what about the poor who can't afford health care?" - that is an entirely DIFFERENT PROBLEM and we shouldn't apply the solution for the poor to everyone. The simplest solution doesn't involve more Welfare State programs - it's a growing economy that makes the Welfare State all but obsolete! The few remaining poor can be handled by private charity. All that big, all-encompassing government programs accomplish is lower economic growth and thus increase unemployment and increase government dependency.

Finally - if you bring your car to a mechanic after 5 years of never changing the oil, air filter, coolant, belts, etc. you can't expect him to just "fix it" for cheap. The same is true with your personal health - if you smoke, drink, do drugs, never exercise, overeat, make lousy nutrition choices, etc. - you can't show up to your doctor at age 65 and say "fix me".

75% of ALL MEDICAL EXPENSES are for the TREATMENT of PREVENTABLE diseases!!! Take reasonable care of yourself!!!

"What difference does it make - get government out of ALL health care."

To get maximum effect from group insurance, the government needs to change existing law.

"[A]fter market" car parts are NOT produced by the original manufacturer."

NOT after market PARTS, After-market Warranties, an insurance product. (Note: the link also references the rising cost of repairs, as did the link in the post you are responding to.)

"The whole idea of insurance is to pool large numbers of people and spread the risk. Your statement is obvious."

Not really, for two reasons:

1) prior to PPACA, many states had Experience Rated individual markets, where the "group" was similarly situated individuals. There are advantages in that for younger and healthier individuals as compared to community rated insurance (as set forth in the above-article). Group Plans have some of the advantages of both models; and

2) Groups also have buying power that individuals do not (as with USAA, which was set up to provide auto insurance for peripatetic Military and Naval personnel who were then deemed a poor insurance risk.

There are multiple issues here, how to insure and provide for people, and how to keep costs down. If we cant keep costs down, it wont matter the scheme we use to provide insurance. In some way the patient has to have some incentive to know the costs of the services, and keep the costs reasonable. Otherwise, there is no incentive for the system to keep the costs down.

It is not easy, since people wan the best care they can get, but we also need to put some market pressure on costs, which is impossible if we dont even know the costs.

I guy private insurance, and the problem with the ACA, is that it mandated certain features be included in insurance, so my policy doubled in cost because of the mandated features. I could not keep the coverage I had before I had to get "better" coverage, even though I didnt want it.

In the 1940s we got into a problem when companies started providing health insurance as a benefit. This took us down a path where the consumer was largely removed from the situation. The consumer didnt buy the insurance, and the consumer didnt know the cost of delivering the service. Any wonder the costs spiraled out of control ?

Perhaps they don't sell them any more but I recall shipmates telling me they bought a contract for just those things the day they bought their new cars in DUHmerica. The name of the company that underwrote the service contract was the same as their insurance company....

Get the government OUT of traditional health care and let people use the free market to purchase what they want at the price they're willing to pay

Get insurance companies profit motive out of it and save an immediate 40%. I didn't just pull that number out of my ass - in countries where there is no business between your health and your doctor the percentage of GDP spent on health care is 40% less.

I guarantee you that if we removed the government protection from monopoly laws (e.g. can't buy health insurance across state lines) that insurance companies bribed our politicians to get, no insurer would see anywhere near a 40% margin.

Getting the "profit motive" out of ANY industry is misguided and goes against human nature. NOBODY works for free or to break even - including yourself. When health care is "free" it will be worth it.

As usual Haluska you're blinded by your Randian adoration. I clearly advocate for there to be no insurance companies you dolt. Get those greedy fuckers out of the equation and one gets an immediate 40% savings.

As with the new proposed Financial Planning Fiduciary rules, there is a place for BOTH the profit motive and fiduciary relationships.

PLANS should be in fiduciary relationships with participants and beneficiaries (and, likely not-for-profit) while insurance companies, working as administrators for Plans, should be profit oriented and arm's length,

"I guarantee you that if we removed the government protection from monopoly laws (e.g. can't buy health insurance across state lines) that insurance companies bribed our politicians to get, no insurer would see anywhere near a 40% margin."

I don't agree. It would probably drive small regional payers out of business and promote consolidation in an already consolidating business sector.

You would get the benefits touted for this more effectively by shifting the norm in coverage to self-insured non-employer-based ERISA Plans that could pre-empt state insurance law.

Yes, the pool is you do health insurance well. It doesn't work properly any other way. Insuring only yourself means every year you are more and more at risk for countless things happening (which means you are riskier which means you should naturally pay higher premiums according to how insurance works). If you have a pre-existing condition, forget about individual insurance. You should be paying over $5000 / month and high according to how "risky" you are.

Employer (organized) group policies worked for a while. Now, they don't so much because many business don't want to do it anymore. They'd rather pay a $2000 / employee penalty than do it. And that leaves a lot of people uncovered.

Let people group themselves into cooperatives to cover themselves as a group and you've solved this entire problem. This is basically illegal today.

Rand Paul just had a very interesting discussion on cnn. He said he doesn't want an individual market. He thinks all of the 37 million individuals should be put in a group which would have tremendous leverage and force the insurers on bended knee to compete for the 37 million.Any thoughts on this?

To other good points raised, you'll never get ahold of costs so long as Medicare exists in its current form. Seniors are the biggest users of healthcare. And the way Medicare works, seniors could care less about the cost of anything. Just keep them alive and healthy.

You can go on about capitalism and sticking it to the poor and/or people with pre-existing conditions who don't work for big corporations to get ahold of costs. But the elephant in the room is Medicare (and this is arguably the reason FOR costs in the U.S. lifting off astronomically compared to other industrialized countries). 50 years of the biggest consumers of healthcare having every test, procedure, operation, drug, everything covered by the government.

Another way to get a hold of costs is some sort of consortium of insurance companies and the government setting prices for what they'll cover, jointly. A lite version of price fixing. But people could pay out of pocket for 'better' procedures. But the basic, for the masses max payout is agreed among all the insurance providers and Medicare / Medicaid.

"Let people group themselves into cooperatives to cover themselves as a group and you've solved this entire problem. This is basically illegal today."

A bit more "expensive and risky" rather than per se illegal.

Unless they fully self-insure MEWAs can't preempt state law and full-on MEWAs that could negotiate group rates with payers and create their own Plans, have very onerous record keeping requirements, exposure to huge fines if that is not done correctly and lots of professional expenses (lawyers and accountants) to do it right.

A type of union, called a Guild, can represent independent contractors, but they are grandfathered due to anti-trust concerns. However, they do provide a model for how to do very broad groups.

"He said he doesn't want an individual market. He thinks all of the 37 million individuals should be put in a group which would have tremendous leverage and force the insurers on bended knee to compete for the 37 million Any thoughts on this?"

Because of the numbers involved, the varied epidemiological and social groups represented, I'd like to see a variety of competing plans representing 350 million people in the US.

Optimal insurance is a failure from the start because it says "you must have this all inclusive coverage to be allowed to have coverage, cost is irrelevant because people adding more and more to the minimum plan don't care if you can afford it".